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(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par
(Individual or component costs of capital) Compute the cost of capital for the firm for the following: a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 10.4 percent Interest payments are $52.00 and are paid semiannually. The bonds have a current market value of S1,129 and will mature in 10 years. The firm's marginal tax rate is 34 percet. b. A new common stock issue that paid a $1.84 dividend last year. The firm's dividends are expected to continue to grow at 6.8 percent per year, forever. The price of the firm's common stock is now $27.61. C. A preferred stock that sells for $139, pays a dividend of 8.1 percent, and has a $100 par value. d. A bond selling to yield 11.7 percent where the firm's tax rate is 34 percent a. The after-tax cost of debt is 5.41%. (Round to two decimal places.) b. The cost of common equity is 13.40 %. (Round to two decimal places.) c. The cost of preferred stock is 6.76 %. (Round to two decimal places.) d. The after-tax cost of debt is 7.85 %. (Round to two decimal places.)
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